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Given the Web space dedicated to the cloud computing model over the past year, you might think that the movement toward vendor- and partner-hosted applications is done and over. But that is not the case.

The truth is, the move to cloud-based computing is part of a continuum that started decades ago. For the purposes of this story, cloud computing is roughly equivalent to Software as a Service (SaaS) -- a model that pairs local devices tapping into server-based features and functions residing beyond the corporate firewall, hosted by an outside provider. The data transfer occurs over the Web using standard protocols.

So why the fuss now? Because the cloud computing model represents an important delivery option for functions that once resided only on a company's servers, storage farms and local PCs. Increased bandwidth nearly everywhere and the falling price of storage and server hardware are other drivers, and virtualization is making the use of that storage and hardware much more efficient than in the past.

The question for the channel is whether IT solution providers should participate in the hosting process, assist it, or forego it altogether. The risk with the last option is that solution providers could cede account control and relationships to vendors.

Google's success in delivering hosted services to consumers and Salesforce.com's ability to provide sales force automation (SFA) to business users are proofs of concept. Market research firm Gartner Inc. estimates that worldwide SaaS deployment revenue will pass the $6.4 billion mark this year, up 27% from $5.1 billion in 2007. Office suites and digital content creation are the fastest growing application areas, according to Gartner.

Microsoft lays out its cloud computing model

Cloud computing is the latest blip -- albeit a big one -- in a trend that included the ill-fated NetPC backed by Oracle CEO Larry Ellison in the 1980s, and more recently by ever more powerful cell phones and mobile devices that combine local storage and smarts with an array of powerful capabilities served up from outside.

Microsoft chief software architect Ray Ozzie said last week that the new cloud world is completely different from those earlier incarnations. He also disputed contentions that this newest wave isn't all it's cracked up to be. Speaking at the Microsoft Professional Developers Conference (PDC) in Los Angeles, Ozzie acknowledged that the model's roots date back to 1960s-era timeshare systems and mainframe virtualization. But there is a difference:

"Is this cloud thing really any different than the things that we've known in the past? The answer is absolutely and resoundingly yes," Ozzie told PDC attendees. "Things are materially different when building systems designed to serve the world of the Web, as compared with the systems designed to serve those living within a company's own four walls. And there's a very significant reason why it might be beneficial to have access to a shared infrastructure designed explicitly to serve the world of the Web, one having plenty of excess capacity, providing kind of an overdraft protection for your website, one built and operated by someone having the IT expertise, the networking and security expertise, all kinds of expertise necessary for a service that spans the globe."

At the PDC, Microsoft provided access codes to four of its new Windows Azure hosted services for value-added resellers (VARs) to try out. Microsoft is hosting base-level foundation technologies as well as higher-level services that partners can host. They include SQL database services, .NET services and Windows Live Services such as Hotmail and Live Messenger.

Amazon.com already fields a non-Windows stack of platform services for Web commerce and is adding Windows and SQL Server to its optional stack soon. Other players, including Google, eBay, NetSuite and Salesforce.com, offer their own takes on hosted services for various customer sets -- including IT solution providers.

Chief among the attributes of all these systems is their theoretical ability to scale computing and storage capacity to accommodate the peaks and valleys of customer demand -- to assign resources to e-tailers during the Christmas shopping rush, for example, and remove them when demand ebbs. The business would pay for the scale it used on a recurring subscription basis.

Once again, Microsoft is late to the party. One developer partner, Robert Anderson, chief technology officer of Digipede Technologies in Oakland, Calif., noted that Microsoft was also tardy in Web browsers but took over that market in relatively short time. The same scenario could play out in cloud computing, he said.

Because of Microsoft's past partner-centric focus, many solution providers expect it to provide them with a bigger piece of the action that Google or other players have thus far controlled.

Solution providers weigh cloud computing model

One of the biggest ways partners can add value as cloud computing emerges is by coaching customers on when the model is appropriate and when it might be best to keep their computing power in house.

"Not every single software type is appropriate for this model," said Chris Rafter, vice president of consulting services for Logicalis, a Bloomfield Hills, Mich.-based system integrator.

Email and other commodity applications are good candidates for Web-based delivery, Rafter said. Customers that are familiar with a certain user interface but don't really care what's running under the covers represent another opportunity.

"For CIOs, paying $100 a year for email and not having to worry about PST files or security -- that's attractive," Rafter said. "All of the expected features and functions and capacities are set forth in the contract. It makes for great transparency."

Logicalis itself offers software data management as a service, managing and cleansing data for a subscription fee. But there are even deployment options within the cloud computing model.

"Some clients send us the data, and we process it and send it back," Rafter said. "Others get a server and put it in their data center, but we run it."

In some cases, solution providers can use cloud computing to offer services they could never build themselves. For example, Gold Systems is a Microsoft VAR that builds applications using Tellme Networks speech technology. Microsoft bought Tellme last year and operates it as a subsidiary. Tellme hosts all the applications, but development partners get a piece of the ongoing action.

"We're a software company that fundamentally does deployments," CEO Terry Gold said. "I don't have the qualifications to go build a 24/7 data center that's going to be reliable."

VARs need to parse demand for cloud computing

For Gold Systems and other VARs, the SaaS model opens up potential new markets. Customers in small companies that don't have the budget for a big one-off capital expenditure can instead subscribe to a service at a fraction of the price, divvying out payments over time.

Of course, the downside of that argument is that VARs who have grown accustomed to big up-front technology buys -- of software licenses, servers, routers and storage -- may lose some of those big-bang bucks. Instead they will see a steady but slow trickle of revenue coming in. That may end up being a good thing, but it's often a painful adjustment.

She echoed other VARs' beliefs that the model may fit some customers in some situations but not others. Partners need to be the trusted advisor to customers weighing the move, and that in itself is an opportunity to tighten up the customer relationship.

The model may spread out payments over time, but it also significantly lowers the cost of sales, said Stephen Moss, chief operating officer of NSPI, a networking services specialist in Roswell, Ga. The move to managed services is a related trend here, and that can also tighten up VAR-customer relationships.

Of course, when vendors and VARs offer similar capabilities and services to customers, there is plenty of room for contention. Many VARs still see Dell and its services push --managed and otherwise -- as a rival in providing customer services. But there's also lots of opportunity for partnering within the ecosystem. This is how companies like Zenith Infotech and N-able have come to the fore, helping VARs remotely manage and monitor customers.

Steve Harper, president of Network Management Group Inc. in Hutchison, Kan., summed it up: If experienced VARs like his company can bring some of their existing relationships with small and medium-sized businesses (SMBs) into the cloud, they will succeed even against large vendors. Regardless of delivery model, success all stems from who serves the customer best.

One huge advantage of the SaaS model -- if it works as promised -- is that the functionality is nearly always "instant on," Rafter said. There's no waiting for a boot-up screen and no real latency when additional capability is requisitioned.

On the downside, some solution providers counsel caution. For one thing, the offline capabilities of these cloud-based offerings leave a lot to be desired. And despite all the progress with Wi-Fi, WiMax and plain-old wiring, Web connectivity is still not ubiquitous.

That is yet another reason VARs need to act as trusted advisors to customers weighing cloud deployment against on-premise implementation. Often the right answer for a given customer is some combination of both cloud-based and earth-bound worlds.

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